At&t Analyzes Baby Bell Profits

September 19, 2002|By Christine Winter Business Writer

AT&T fired its latest volley Wednesday in the continuing battle between long-distance carriers and the local Bell telephone companies, claiming the Bells are benefiting from the 1996 Telecom Act that deregulated the industry.

The long-distance giant produced an extensive analysis of publicly available figures, which it says proves that the Bells' gains when they enter the long-distance market far outweigh their local losses from increased competition in residential markets.

A BellSouth spokesman, Spero Canton, pointed out, however, that BellSouth is just entering the long-distance market in many of its states.

"We will be starting at zero market share, and they are well established," he said, adding the long-distance market is not as lucrative a market as it once was because of heavy competition.

Jim Cicconi, AT&T general counsel, said the study was undertaken in response to the Bells' efforts to lobby Congress and the Federal Communications Commission to end local telephone competition.

"The Bells have been seeking to preempt the states' local unbundled element platform rates and the outcome will be higher consumer rates," he said in a Washington, D.C., press conference. "We are concerned that the Bells are misrepresenting their costs."

In the report, AT&T analysts figured the revenues the Bells make on their residential lines, including basic local rates, add-on features and other subsidies and fees they collect. AT&T said when Bells lease those lines as complete packages of unbundled elements to competitors at currently approved rates, they make less revenue per line, but they also drop some customer care and billing costs.

The report shows that BellSouth has the second highest average wholesale revenues from leasing its lines of the four regional Bell companies, and therefore the second lowest loss in revenue for each line they lease.

AT&T's calculations indicate that BellSouth makes $2.83 less for each assembled package of unbundled elements it leases than it would have made selling the service to residents itself. The study calculated that if BellSouth lost 15 percent of its local market to competitors, it would lose about $86 million in revenues a year.

However, once the various operating companies that make up BellSouth get approval for long distance, the study shows that a 30 percent market share of residential long distance lines would result in $425.7 million in revenues yearly.

The Bells, however, insist they have been forced to subsidize their residential rates for years with higher business rates.

Christine Winter can be reached at cwinter@sun-sentinel .com or 954-356-4664.